MoF releases five billion rupees for ERF

The Ministry of Finance (MoF) has released Rs five billion to Nepal Rastra Bank (NRB) for the execution of the Economic Revival Fund (ERF). The ERF was established to extend interest subsidy and refinancing facility to borrowers of the productive sector who were affected by the earthquakes and border blockade last fiscal year.

The MoF has released the amount six months after the formal launch of ERF, which has envisioned extending credit facility of up to Rs 100 billion to the productive sector.

The ERF will now come into operation as the government has pledged to extend the resource based on the credit demand, according to Surya Prasad Acharya, joint secretary of MoF. “NRB will bring the ERF into operation as MoF has released Rs five billion and commercial banks have made a commitment of around Rs 31 billion to the fund.”

The amount pledged by the commercial banks can be factored in while calculating the amount incorporated in their capital fund.

NRB has already instructed all banks and financial institutions (BFIs) to work according to the ERF Operation Guideline which was endorsed by the government.

The ERF was created through contributions made by the government, BFIs, and development partners. Also, interest earnings from refinancing facility will be injected into the Fund.

As per the guideline, NRB will provide credit line to each BFI at 1.5 per cent interest. BFIs will then have to extend refinancing facility to good borrowers at an interest rate of not more than five per cent.

Borrowers can apply for 100 per cent refinancing facility on credit of up to Rs 50 million for a period of two years. If the loan amount exceeds this level, 20 per cent of the credit amount in excess of Rs 50 million will be extended as refinancing facility. Borrowers, who are already availing refinancing facility for exports and sick industries, however, will not be eligible for ERF credit.

Extension of the refinancing facility will be monitored by a six-member committee formed under deputy governor of NRB.

The refinancing facility will be provided strictly to the productive sector, which can generate jobs and contribute in capital formation process.